When do you withdrawal from your portfolio?

[rodi]

We are leaving the IRAs alone till RMD time. Except for an inherited IRA that I need to take withdrawals from. (Predates secure act). It has grown large enough in the 16 years since Dad died that the RMD is pretty close to what we need to cover above and beyond our other income sources (rent, tiny pension(s), DH's ss). I withdraw it quarterly, paying taxes each time. It is transferred to my brokerage - and from there I give a monthly allotment to checking.

I take a little extra tax out when I make the withdrawal to cover the rental income... IRS hasn't complained yet.

As for rebalancing - I look at it each quarter when I'm doing the withdrawal. If I need to sell shares to get the cash - I look at what to sell to rebalance... and any extra rebalancing as needed.

 

[RunningBum]

Exactly my thoughts! My wife and I want to pass away the minute we use our last dollar! However, it’s tricky because we never know when that’s going to happen and because we are only 49/51 we need our money to work for us for hopefully another 40 years

Go heavy on annuities. Preferably SPIAs.

 

[audreyh1]

So when you do your annual withdrawal you alway rebalance? Why? Just curious because I envision when I’m in your shoes someday, the bulk of my portfolio will be in something like an S&P index fund- which requires virtually no intervention from me I suppose…

If you aren't maintaining a target AA then you don't need to worry about rebalancing.

I have a target AA that I rebalance to every Jan after withdrawal unless it's close enough already.

 

[67walkon]

My rmd goes almost 100% to faith based charities.

On the other assets, when we need money, we withdraw it. Its less than 4% most years, but if its more than 4%, who cares? I'm 72, been retired 10 years and there's no way we run out of money unless the government confiscates every thing. Just watch your balances, cut expenses when you need to and enjoy life. I tell my kids we're living on their money now! And they are good with us spending their money.

 

[audreyh1]

If you do one large withdrawal at the end of the year, does that eliminate the need to do quarterly estimated payments?

Just need to do the last one by Jan 15 the following year unless you had the income taxes withheld as part of your IRA/401K withdrawal.

In the case of paying estimated taxes only after final tax quarter you will probably need to file form 2210 stating and give the income received during the other quarters - and if 0 or very small no big deal.

 

[yclipse]

One more advantage, based on January-May 2020: If you liquidate what you need early in the year, even if you just hold cash for a while, you avoid the unpleasantness that might happen if the overall value of your holdings suddenly drops a couple of months later.

 

[Souschef]

I am in RMD , and have attached the schedule I use. I use EFTPS and the CA equivalent to schedule my quarterly payments.

YMMV

 

[rayvt]

One more advantage, based on January-May 2020: If you liquidate what you need early in the year, even if you just hold cash for a while, you avoid the unpleasantness that might happen if the overall value of your holdings suddenly drops a couple of months later.

The statistics show that it is better to take the withdrawal at the end of the year. Here's a spreadsheet:

https://www.dropbox.com/s/d4y862pc3g2im1m/RMD-when%20to%20take.xls?dl=0

If you can't accept the " unpleasantness" of a drop, you should not be investing in stocks in the first place.

 

[corn18]

I'd keep two-three years expenses cash in reserve at all times.

I draw my entire year's allotted cash on the first business day of the year. I don't really think it matters, however, when you do it.

The problem with this approach is you always have 2-3 years of cash. That is a drag on returns. Why have any cash at all if you are going to withdraw every year to replenish the cash?

I retired 3/21 this year and had 3 years cash. I have been spending the cash this year because my marginal tax rate this year is 44% and my LTCG bracket is 24% because I got a large severance package.

For next year, I plan to spend the rest of the cash. I thought it would be useful but it isn't. If the market crashes, I'll be glad to have the cash, but if it goes up 22%, I would have rather had it in the market.

It's really pretty simple: invest when you have money, withdraw when you need money.

 

[RoBo]

I plan to stick with the 4% withdrawal rate practice when I retire in the next few weeks. I have enough cash in savings to cover a years worth of expenses so I have a couple of questions:

1) When do you withdraw from your portfolio (weekly, monthly, quarterly, annually)? Any tips/strategies?
2) Would you recommend that I keep a years worth of expenses in a savings account and start withdrawing now or drain the savings and then withdraw?

If you don't believe in the importance of a plan then just go with whatever 'feels' right at the time. However, if after studying personal finance you haveGoing in you need to have a plan as to the balance of cash, fixed assets and equities you are going to maintain during the foreseeable future. If you do not sell anything and simply use your cash then you have distorted the plan. The whole idea is stick to it even as things do change. Similarly by not maintaining expenses for 1 year in net after tax cash savings you have violated the plan.
If you expend the 1 year of cash you have in savings then you have also failed to stay with your plan. Think that emergencies in need of cash can't happen in retirement? Think again.

My advice: Research, consider and come up with a plan. Regardless of what happens us discipline and stick with it through all eventualities unless you decide that a new plan is imperative. Then stick with it...

 

[Retired Expat]

I withdraw a fixed amount monthly to my checking account cover the delta between other income and expenses. I maintain a cash account where all dividends and interest payments go. If at the end of the year, or before there is a surplus above the cushion I have set allowing for anticipated or upcoming irregular expenses, like big trip, buy a car etc, I will reinvest.

But my WR is about 1% so not spending my principal nor do I except to in the current world situation

 

[Dalmore]

As I am a month or two away from starting my third year of retirement, my withdraw needs have been small. I am still watching the budget and seeing how it performs WRT our current standard of living. So far, dividends in our taxed accounts has covered our expenses for the year. I leave them in a MM account and then in Jan/Jun pull out what is projected for the next 6 months and fill up various organizational pots I have at the CU. If something big and unexpected shows up, I will go back for more.

 

[RetireBy90]

My thinking is you should take RMD or withdraws from TIRA in Dec so tha $$ has had full year to earn it’s keep. Roth conversions should be as early in the year as you can so that years return will be in Roth and tax free.

My actual habit is to convert throughout the year as I become more confident in my estimate of current year income so I don’t go over IRMAA cliff or new tax bracket. For spending so far I take money from taxable account as needed, maybe 3 times a year to checking. I have a small RMD from inherited account and that is an end of year draw I have 100% withholding for taxes. Works for me

 

[RunningBum]

The problem with letting the $$ to "earn it's keep" is that you pay more tax when you take it out in December. Better to take it early, and get more favorable tax treatment if some of those gains are qualified dividends, or LTCGs if you hold them a year or longer.

I've also heard it's better to take RMDs early in the year, something about how the RMD is taxed in your estate if you die without taking your RMD that year.

 

[RetireBy90]

The problem with letting the $$ to "earn it's keep" is that you pay more tax when you take it out in December. Better to take it early, and get more favorable tax treatment if some of those gains are qualified dividends, or LTCGs if you hold them a year or longer.

But there is more there so really doesn’t make a difference that I suggested.
Say you start with $100 and will earn 10%, and in 22% marginal taxes. if you take the $100 1Jan, you have $78 left, and will earn $7.80 that year, so $86. If you wait till 31 Dec, take $110, you have $86.
All you do is earn 10% for feds ?
What a system or

 

[RunningBum]

I was thinking the numbers worked out differently, but I guess not.

 

[Christine]

In addition to my disability pension I give myself a monthly paycheck.


I have a cash buffer with enough for about 6 months. Then I look at the MA50 of my investments. And if the value is below the MA50 and I have cash left in my buffer I use that for my paycheck.


If the value is above the MA50 or my buffer is empty (not yet happened) then I sell some shares/funds for my paycheck.


If my buffer is running low or my investments reach new peak values I sell more than I need for the monthly paycheck to put into the cash buffer.


And I put money for taxes into a separate account whenever I sell.

 

[yclipse]

If you know the value of your investments will increase over the year, then by all means you should let it stay and "earn its keep."

 

[rayvt]

My thinking is you should take RMD or withdraws from TIRA in Dec so tha $$ has had full year to earn it’s keep. Roth conversions should be as early in the year as you can so that years return will be in Roth and tax free.

You cannot do that. The RMD must be taken out first, before any conversions or rollovers.

 

[mickeyd]

I only remove RMD from my TIRA. I transfer from TSM (pay tax) and into TSM in taxable account. I wait for S&P 500 to arrive at new record around midyear and take half then wait for another record high to take out the rest. If no new record high is available, I sell in December. It may not be the best system, but it's my system.

 

[scrabbler1]

I use the monthly dividends from a big bond fund in my taxable portfolio to pay my bills. I am not yet old enough to take money from my IRA, nor am I old enough to start taking SS or my frozen company pension (those are my 3 "reinforcements").

A few years ago, before I changed part of my portfolio, I used the quarterly dividends from a stock fund to supplement the big bond fund's income. I don't need that income any more.

 

[pb4uski]

I plan to stick with the 4% withdrawal rate practice when I retire in the next few weeks. I have enough cash in savings to cover a years worth of expenses so I have a couple of questions:

1) When do you withdraw from your portfolio (weekly, monthly, quarterly, annually)? Any tips/strategies?
2) Would you recommend that I keep a years worth of expenses in a savings account and start withdrawing now or drain the savings and then withdraw?

When I rebalance I replenish an online savings account for a year's worth of withdrawals and ~$10k of "safety stock". I then have a monthly 'paycheck" that is a transfer from the online savings account to the checking account that we use to pay our bills. The monthly transfer is usually sufficient unless we have some unusual lumpy spending. We do have a bit more in November when our annual property taxes and home/car insurance are due and I do a special transfer to cover those.

 

[tmm99]

I take most of the spending money out in Jan in one shot, but I put that money in a savings account and a certain amount is automatically transferred into my checking account every month - It kind of mimics getting paychecks.

 

[rayvt]

I take most of the spending money out in Jan in one shot, but I put that money in a savings account and a certain amount is automatically transferred into my checking account every month - It kind of mimics getting paychecks.

We did that for the first few years, but even though the pseudo-paycheck was constant our spending was not. If we had a big expense, like buying a car for cash or taking a long cruise, there was not enough money in the checking account so we had to "borrow" from the savings account. And then had to remember to "pay" it back.

If we had unusually low expenses (like when a cruise got cancelled) then the money piled up in the checking account.

All in all, it was simpler to take or withdraw what we needed and just kept a running total to see how we were doings vs. the planned 4% SWR withdrawals.

What with everything being shut down in 2020 & 2021 (and who knows maybe even 2022) our expenses were quite small so we are way under the 4% mark.
Better to leave that money invested rather than taking it out and sticking it in a savings account which pays only a pittance in interest.

 

[tmm99]

We did that for the first few years, but even though the pseudo-paycheck was constant our spending was not. If we had a big expense, like buying a car for cash or taking a long cruise, there was not enough money in the checking account so we had to "borrow" from the savings account. And then had to remember to "pay" it back.

If we had unusually low expenses (like when a cruise got cancelled) then the money piled up in the checking account.

All in all, it was simpler to take or withdraw what we needed and just kept a running total to see how we were doings vs. the planned 4% SWR withdrawals.

What with everything being shut down in 2020 & 2021 (and who knows maybe even 2022) our expenses were quite small so we are way under the 4% mark.
Better to leave that money invested rather than taking it out and sticking it in a savings account which pays only a pittance in interest.

Mine is a lot looser than that. I never borrow money; I just transfer more money from my savings into my checking account if we need extra money to replace the roof, etc. If money piles up too much in my checking account, I just move some back to my savings. I still like the paycheck-type setup for fairly constant expenses like utilities and groceries.